Thanks to improved automobile fuel efficiency, new hydraulic
fracturing (fracking) methods and a boom in unconventional oil
production, America's drive to become energy dependent seems closer
than ever (read:
3 Top Performing Energy ETFs in Focus Now
Today, the U.S. is producing a million more barrels of oil a day
compared to last year, owing to newly tapped oil and gas fields in
North Dakota and Texas, while oil imports have slumped to their
lowest level in 18 years. This is particularly true given that the
U.S. has produced an average of 7.7 million barrels of oil per day
in October, exceeding oil imports of 7.6 million barrels per day.
According to the Energy Information Administration (EIA), U.S.
crude oil production may increase gradually in the coming years
from 6.5 million barrels per day produced in 2012 to 7.5 million
barrels a day, and 8.5 million barrels a day in 2014. With this,
the U.S. is expected to overtake Russia as the world's biggest
producer of oil within two years and become energy sufficient in
the next two decades.
On the other hand, the international organization also projects
that imports would fall to the lowest level since 1985 at 28% of
total consumption in 2014 from the peak 60% in 2005. This trend of
growing oil production and falling imports will have a major
influence on the American economy and the country's energy firms
Is This the Top for Oil Service ETFs?
Apart from a booming shale oil and gas business, many firms in the
oil and gas industry are poised to benefit from rising commodity
prices and global oil consumption. According to the Labor
Department, the oil and natural gas industry in the U.S. accounted
for a large share of the gains in private sector employment, adding
bullishness to the sector.
Given the optimism and promising growth outlook, investors seeking
to play booming American oil production might want to tap the space
in the ETF form. For those investors, we have highlighted three
ETFs that could be worth a look if America continues to expand its
oil production levels and becomes a leader in energy development
all the energy ETFs here
iShares U.S. Oil & Gas Exploration & Production ETF
This ETF tracks the Dow Jones U.S. Select Oil Exploration &
Production Index and holds 70 securities in total. The product has
been able to manage assets worth $431.2 million and trades in good
volume of 114,000 shares per day. The ETF charges 45 bps in fees
The product is largely concentrated across its top 10 securities
with Conoco Phillips (
) accounting for the largest share of over 14%. Other securities
such as EOG Resources (
) and Anadarko (
) hold less than 7.3% of assets. From a sector look, the fund is
tilted toward exploration and production making up for 82% share
while refining & marketing, and pipeline & distribution
take the lesser portion in the basket.
The fund has delivered strong returns of 27.7% in the year-to-date
period. IEO has a Zacks ETF Rank of 1 or 'Strong Buy' rating with a
Medium risk outlook.
Market Vectors Unconventional Oil & Gas ETF (
Unlike other products in the energy space, this ETF provides
exposure to the unconventional oil and gas segment, which includes
coalbed methane, coal seam gas, shale oil & gas, and sands
market. This fund follows the Market Vectors Global Unconventional
Oil & Gas Index, holding 49 stocks in the basket. Volume and
AUM are quite low for this large cap focused fund while he expense
ratio is at 0.54%.
Top three components include Occidental Petroleum (
), APC and EOG with a combined share of nearly 23% of total assets.
Here again, exploration & production takes the top spot in
terms of sector exposure, while oil & gas integrated also make
up for a decent chunk (read:
A Comprehensive Guide to Oil & Gas ETFs
The ETF added 26.7% in the year-to-date time frame and has a decent
Zacks ETF Rank of 3 or 'Hold' rating with a High risk outlook.
SPDR S&P Oil & Gas Equipment & Services ETF (
This fund provides equal weight exposure across 48 securities by
tracking the S&P Oil & Gas Equipment & Services Select
Industry Index. The top three holdings include Geospace
), Carbo Ceramics (
) and Transocean (
). Thanks to the equal weight approach, large caps make up just 22%
of assets, leaving big amounts for small and micro cap securities.
The product puts a heavy focus on equipment/services, though
drilling companies also account for a decent chunk of total assets
Energy ETFs Surge on Q3 Oil Service Earnings
). The fund has amassed $320.2 million in its asset base while sees
moderate volume of more than 67,000 shares a day. The ETF has a
0.35% expense ratio.
XES returned over 29% so far this year and has a decent Zacks ETF
Rank of 3 or 'Hold' rating with a High risk outlook.
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CONOCOPHILLIPS (COP): Free Stock Analysis
MKT VEC-UNC O&G (FRAK): ETF Research
ISHARS-US O&G (IEO): ETF Research Reports
OCCIDENTAL PET (OXY): Free Stock Analysis
SPDR-SP O&G EQP (XES): ETF Research Reports
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